Social networking site Facebook is seeing its share slide as investors wake up to the fact that they have bought a lemon for the price of a Densuke Watermelon.
When the company’s IPO was announced on Friday we said that a lot of people were going to get burnt on this as the hype gave way to reality.
When the IPO was announced, it valued Facebook at $100 billion when the company could only make a billion a year.
Facebook shares sank 11 percent in the first day of trading without the full support of the company’s underwriters, leaving some investors down almost 25 percent from where they were Friday.
Frank Lesh, a futures analyst and broker at FuturePath Trading LLC told Reuters that Facebook was not living up to the hype and was over valued.
By yesterday the share price had stablised a little, valuing the company at $90 billion.
We have been consulting the tarot cards and think that Facebook should stay around these levels for a while. There are lot of people who think they have bought the shares for the long term.
However, it is the long term where Facebook will suffer. It has to prove that it will be a bigger and stronger company than Apple or Google. To do that the company will have to make more money than it has so far and there are no indications as to how this will happen.
As earnings results show no changes or, worse, a slump in profits, then the share price will fall even further.